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What is employee incentive compensation?

On Behalf of | Jan 11, 2024 | Business Litigation

In addition to your regular pay, your employer may offer employee incentive compensation. This includes rewards and benefits that you may receive because of your performance and productivity.

Usually, the company will set a goal or metric that you need to meet and determine whether you have met it. Then, it will distribute the payments that are outlined in its program.

Compensation forms

There are several types of incentive compensation. You may earn a bonus, which can be based on performance, a signing bonus when you join the company or a bonus for you to stay with the company.

Some companies will offer a share of the company’s profits or stock options. Stock options encourage employees to perform well because it helps to increase their company’s stock value. Employees may also earn commissions if they meet certain goals.


Occasionally, you may have a dispute with your employer about the incentive compensation. Disagreements can arise if there is miscommunication about how to earn the incentive. You may believe that you have met all criteria to earn the payment and your employer may disagree.

They can also happen if the employer does not correctly calculate how much you have earned or says that you are not vested, which means that you fully own and control the money, until a later time.

It’s important for your employer to use a fair and transparent process for incentive compensation, as well as give you regular updates on your progress toward earning it. If it does not, you may have a claim for compensation.